Scarce media is defined as media providing limited amount of space. For example, newspaper and magazines have limited amount of page space; radio and television have a limited amount of air time slots; Internet web pages have limited amount of viewable screen space and/or bandwidth; and so on. Media providers (such as magazines and newspaper publishers, radio and television broadcasters, Internet content providers and advertising networks) commonly bill advertisers based on two prevalent pricing models.
The first pricing model, based on the number of impressions delivered, is often referred to as “CPM” pricing (i.e. cost per thousand impressions). In CPM pricing, an advertiser pays a media provider a fixed amount based on the circulation of their advertisement, regardless of whether the advertising campaign is successful.
The second pricing model, based on explicit customer feedback, is sometimes referred to as “Direct Response” or “CPA” advertising (i.e. cost per actions). CPA pricing is distinguished from CPM pricing, because in CPA pricing, a marketer compensates a media provider a variable amount based on the success of the advertising campaign. Successful ad campaigns are measured, for example, by the number of survey forms filled out, leads generated, sales transacted, software downloaded, and so on.
Whereas in CPM pricing, an advertiser is entirely at risk for an unsuccessful advertising campaign, in the case of CPA pricing, the risk of an ad campaign's success is placed wholly on the media provider. It is therefore an important objective of media providers to select successful direct advertising campaigns in order to utilize scarce media space efficiently and optimize revenue.
A significant economic problem exists for media providers billing on CPA models, wherein two or more direct advertisers wish to advertise on the same scarce space and only one can be accommodated. The media provides would normally prefer to allocate its space to direct advertisers so as to maximize revenue. A revenue maximizing strategy dictates that media providers allocate space to the most successful direct advertising campaign, however, successful campaigns are not known on a pro forma basis. Consequently, media providers are currently burdened with the task of estimating the performance of direct advertising campaigns. Selection of direct advertising, which is currently done in an ad hoc fashion, is usually a manual process.
Further, current media allocations do not make reference to, or precisely measure, the “context” in which each direct advertisement performs best. Context is defined as the particular user to which the Advertisement is shown; and/or the particular date and/or time during which the Advertisement is displayed; and/or the particular “Division of Media” (a term defined below) in which the Advertisement is placed. Current selection of direct response advertising for CPA models is therefore highly inefficient and prone to error, often resulting in sub-optimal allocations of scarce media. Poorly performing direct advertisements represent a cost of opportunity and therefore an economic loss for the media provider. Conversely, better performing direct advertisements would generate more revenue and make better use of scarce media space.
In summary, there is an important need for a method and apparatus for improved selection of direct response advertisements and more efficient utilization of scarce media in direct response advertising.